Fitch upgrades Capital One

Fitch Ratings said it upgraded Capital One Financial Corp.'s long-term issuer default rating to BBB+ from BBB and removed it from Rating Watch positive. The outlook is positive. This follows Capital One's announcement that it has entered into an agreement to acquire North Fork Bancorp. Inc. (A-/negative watch/F1).

Fitch said the upgrade reflects the company's progress in integrating Hibernia Corp., which Capital One acquired in November, and the relatively stable operating performance in Capital One's core consumer finance businesses. Moreover, the agency is encouraged that the spike in bankruptcies witnessed in October has abated and consumer defaults will likely remain within current ranges through the remainder of the year.

The agency said the positive outlook reflects the view that Capital One can enhance its franchise through the acquisition of North Fork, which brings with it a material residential mortgage banking platform, an area in which Capital One has a small presence, and strong deposit share in the New York metropolitan area.

Fitch predicted, however, that North Fork will be more challenged to integrate, particularly following closely on the Hibernia acquisition, although this risk is mitigated by Capital One's record in integrating acquired companies and retaining key management.

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